Choice Hotels International, Inc. v. SNV Hospitality, LLC et al

Filing 11

MEMORANDUM OPINION. Signed by Judge George Jarrod Hazel on 9/22/2016. (kns, Deputy Clerk) Modified to include (c/m on 9/22/2016). (kns, Deputy Clerk)

FILED

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S.AJJ;.:r~ICT COURT

IN THE UNITED STATES DlSTRI~ :1i~'1~tRYLAHO
FOR THE DISTRICT OF MAR\" ~ AND
SOl/thern Division

A 10: 21

ZOlbSEP 22

CHOICE HOTELS
INTERNA TlONAL, INC.,

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CLERK'S nmCi

f..TGRE::'i~r! i

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BY--

Plaintiff,

v.
SNV HOSPITALITY,

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LLC, ET AL.,

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Defendants.

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Case No.: G./H-IS-0238S

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MEMORANDUM

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OPINION

Pursuant to Fed. R. Civ. P. 55(b), Plaintiff Choice Hotels International, Inc. ("Plaintiff'
or "Choice") has filed a Request for Default by Judgment, with a supporting affidavit, against
Defendants SNV Hospitality, LLC and Muklesh Patel (collectively, "Defendants"). ECF No.6;
ECF No. 6-2. Presently pending before the Court is Plaintiffs Amended Motion for Judgment by
Default. ECF No. 10. A hearing is not necessary in this case. See Loc. R. 105.6 (D. Md.). For the
reasons that follow, Plaintiffs Amended Motion for Judgment by Default will be granted.
I.

BACKGROUND

Choice is a "publicly-traded company incorporated under the laws of the State of
Delaware, with principal headquarters in Rockville, Maryland." ECF No. I0 ~ 1.1 Choice is
"primarily in the business of franchising hotels domestically and internationally ... including but
not limited to the trade and brand marks, names and systems associated with Comfort Inn@." Id.
Defendant SNV Hospitality, LLC is "based upon information, knowledge and belief, a limited
I All facts herein are taken from PlaintiiT's Application to Confirm Arbitration Award, ECF No. I, and PlaintiiT's
Amended Motion for Judgment by Default, ECF No. 10.

liability company organized under the laws of the State of Ohio, with principal place of business
located in Ohio." Id. ~ 2. Defendant Muklesh Patel is "based upon information, knowledge and
belief, a resident and citizen of the State of Ohio." Id. ~ 3. On or about December 29, 2005,
Choice entered into a Franchise Agreement with Defendants, individually, jointly and severally,
under which Choice granted Defendants a limited and revocable license to operate a Comfort Inn
hotel in Wapakoneta, Ohio. Id. ~ 4. The parties' Franchise Agreement contained an arbitration
clause; stating in relevant part that "any controversy or claim arising out of or relating to this
Agreement ... will be sent to final and binding arbitration before either the American
Arbitration Association, J.A.M.S., or National Arbitration Forum ... " See ECF No. 1-2 at 1.2 In
Plaintiffs Amended Motion for Judgment by Default, Plaintiff states:
During the term of the Franchise Agreement, Defendants defaulted
on their material obligations to make timely payment to Choice of
franchise-related fees. Choice issued Defendants a written Notice
of Default, and Defendants failed to cure said Default. Accordingly
and as a result of Defendants' material breach, Choice terminated
the Franchise Agreement.

Id. fl5.
On or about August 21, 2014, Choice initiated arbitration proceedings against Defendant
with the American Arbitration Association, Case No.: 01-14-0001-2633, "seeking resolution of
its dispute with Defendants." Id. ~ 7. "Specifically, Choice claimed that Defendant materially
breached the parties' Franchise Agreement and owed Choice fees, damages, interest, and costs
incurred as a result of Defendant's breach." Id.
Arbitration proceedings were scheduled for March 17,2015. See ECF NO.1 at I; ECF
No. 1-1. Plaintiff sent notice of the proceedings to Defendants at their last known address "by
Pin cites to documents filed on the Court's electronic filing system (CMlECF) rerer to the page numbers generated
by that system.
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regular mail, certified mail and/or overnight FedEx delivery." ECF No. I 0 ~ 9. "Defendants
failed to appear or participate during any proceeding." Id. The Arbitrator determined that
"Defendant had received due and proper notice of all proceedings in accordance with AAA's
Commercial Rules, the Franchise Agreement, and Maryland law" and entered an award in
Choice's favor against Defendants in the amount of$80,961.94.

ECF No. I0 ~ II; ECF No. I-I.

The Arbitrator also ordered Defendants to reimburse Choice in the sum total of $2,850.00 for
"administrative filing fees of the AAA" and "fees and expenses of the arbitrator:' ECF No. I-I.
Choice filed an "Application to Contirm Arbitration Award" in this Court on August 12~
2015. ECF No. I. The "Ex Parte Award of Arbitrator," signed by Kathryn P. Broderick of the
American Arbitration Association on March 17,2015, is attached to the Application. ECF No.
1-1. Choice named SNV Hospitality, Inc. and Muklesh Patel as defendants. ECF No. I. The
court issued summons to Defendants on August 14, 20 IS, and the summons were returned as
executed on October 8, 2015. ECF No.3; ECF NO.4. The Clerk made an entry of default for
want of answer against Defendants on December 3, 2015. ECF NO.8. This Court issued a Letter
Order directing Plaintiff to supplement its Motion for Default Judgment, and Plaintiff filed its
currently pending Amended Motion for Judgment by Default on August 2, 2016. ECF No. 10.
II.

DISCUSSION
A. Motion for Default

"A defendant's default does not automatically entitle the plaintiff to entry of a default
judgment; rather, that decision is left to the discretion of the court." Choice Holels Intern., Inc. v.
Savannah Shakli Corp., DKC-II-0438,

2011 WL 5118328 at' 2 (D. Md. Oct. 25, 2011) (citing

Dow v. Jones, 232 F.Supp. 2d 491, 494 (D. Md. 2002». When a motion for default judgment is
based on an arbitration award, the plaintiff "must show that it is entitled to confirmation of the

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award as a matter oflaw. " Id (citations and internal quotation marks omitted).
Under the Federal Arbitration Act, a court may confirm an arbitration award "[i]f the
parties in their agreement have agreed that a judgment of the court shall be entered upon the
award made pursuant to the arbitration ... " 9 U.S.c.

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9. The Court must confirm the award

unless it vacates, modifies, or corrects the award under 9 U.S.c.

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10 or II. Id "Federal courts

may vacate an arbitration award only upon a showing of one of the grounds listed in the Federal
Arbitration Act, or if the arbitrator acted in manifest disregard of law." Apex Plumbing Supply v.

u.s. Supply

Co., Inc.• 142 F.3d 188, 193 (4th Cir. 1998). The situations permitting a court to

vacate an arbitration award are found at 9 U.S.C.

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10(a), which provides:

In any of the following cases the United States court in and for the
district wherein the award was made may make an order vacating
the award upon the application of any party to the arbitration-(I) where the award was procured by corruption, fraud, or undue
means;

(2) where there was evident partiality or corruption in the
arbitrators, or either of them;
(3) where the arbitrators were guilty of misconduct in refusing to
postpone the hearing, upon sufficient cause shown, or in refusing
to hear evidence pertinent and material to the controversy; or of
any other misbehavior by which the rights of any party have been
prej udiced; or
(4) where the arbitrators exceeded their powers, or so imperfectly
executed them that a mutual, final, and definite award upon the
subject matter submitted was not made.
9 U.S.c.

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lO(a).

"The exceptions to confirmation of awards are strictly limited to avoid frustrating the
fundamental purpose of arbitration, i.e.. quick dispute resolution and avoidance of the expense
and delay of court proceedings." Jih v. Long & Foster Real Estate, Inc., 800 F.Supp. 312, 317
(D. Md. 1992) (citations omitted). In essence, the Court's role in reviewing an arbitrator's
decision is "to determine only whether the arbitrator did his job-not

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whether he did it well,

correctly, or reasonably, but simply whether he did it." Wachnvia Securities, LLC v. Brand, 671
F.3d 472, 478 (4th Cir. 2012) (citations and internal quotation marks omitted).
Here, Choice's claims were properly before the American Arbitration Association under
the arbitration clause of the parties' Franchise Agreement. See ECF No. 1-2. "Despite duly and
properly notifying Defendant of all proceedings relating to the arbitration proceedings ...
Defendants failed to appear or participate during any proceeding." ECF No. I0 ~ 9. Choice notes
in its Amended Motion for Judgment by Default:
[Iln accordance with the parties' Arbitration Agreement, AAA
Commercial Rule 31, which states in relevant part that "the
arbitration may proceed in the absence of any party or
representative who, after due notice, fails to be present ... ", and
AAA Commercial Rule 33, which states in relevant part that "the
arbitrator may also allow for the presentation of evidence by
alternative means including ...
means other than an in-person
presentation," the arbitrator determined the most efficient and
inclusive means for proceeding with evidentiary consideration was
to allow the parties to submit evidence, documentation, and
argument by written submission.
Id. ~ 10. "After considering the evidence presented and AAA's record, the arbitrator determined
and ruled that Defendant had received due and proper notice of all proceedings in accordance
with AAA's Commercial Rules, the Franchise Agreement, and Maryland law ... " ECF No.
I 0 ~ II. The Arbitrator determined that Defendant had breached the parties' Franchise
Agreement and rendered her award in Plaintiffs favor. ECF No. I0 ~ II.
The Court finds no reason in the record to question the validity of the Franchise
Agreement or the conduct of the Arbitrator. See Choice Holels Inl'l, Inc. v. Bhupinder Mander,
No. GJH-14-3159, 2015 WL 1880277, at *4 (D. Md. Apr. 22, 2015). Further, the parties agreed
that "[iJf any party fails to appear at any properly noticed arbitration proceeding, an award may
be entered against the party, notwithstanding its failure to appear." See ECF No. 1-2 at J. The

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parties also agreed that "[j] udgment on the arbitration award may be entered in any court having
jurisdiction." See id.
III.

CONCLUSION

For the reasons explained above, Plaintiffs Amended Motion for Judgment by Default,
ECF No. 10, will be granted. Judgment by default is entered in favor of Plaintiff Choice Hotels
and against Defendants SNV Hospitality, LLC and Muklesh Patel, in the amount of $84,211.94,
representing the Arbitrator's award of $80,961.94, administrative filing fees totaling $1,850.00,
fees and expenses of the Arbitrator totaling $1,000.00, and costs of the action totaling $400.00.
ECF No. I-I; ECF No. 1.3 A separate Order shall issue.

Dated: September

t --z-..: 2016
George J. Hazel
United States District Judge

In contrast to this Court's decision in Choice Hotels Int'l, Inc. v. Bhupinder Mander, No. GJH-14-3159, 2015 WL
1880277, at *4 (D. Md. Apr. 22, 2015), Choice Hotels requested "costs of the action" in their original Application to
Confirm Arbitration Award, ECF NO.1 at 2. Therefore, the default judgment does not "differ in kind from, or
exceed in amount, what is demanded in the pleadings." See Fed. R. Civ. P. 54 (c).
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